The
average voter is not much interested in the wider world; his concerns are domestic
issues - the economy, whether an interest rate rise will make his mortgage
unaffordable, immigration, a good education for his children, crime.
But
we are seeing a revolution in the world order which may well become the hallmark
of the 21st Century.
This revolution is a triple clash between politics, economics
and radical changes in society.
Society
is changing radically as people become better-off, better informed especially through
the advent of social media, and better educated. They are increasingly impatient
with the status quo. There is trouble in store if politics does not adjust to
the changes and respond to the associated economic challenges.
First,
America.
It
swings from excessive foreign interference
to extreme isolation. It is now in isolation mode
Congress
is obsessed with political self-interest, prepared to scupper Obama’s world trade negotiations,
with economic considerations side-lined in favour of taking every opportunity
to make life impossible for Obama.
After
four years of painstaking negotiations by the Administration, Congress is now
blocking reform of the IMF although it
doesn’t have a dog in the fight since it will be Europe that is most affected by
the agreement to alter rates of contributions and voting strength. The European
Free Trade Agreement is beginning to look dead on in the water. The
Trans-Pacific FTA appears to be going nowhere. The common factor is lack of
confidence by the participating nations of Obama’s capacity to deliver in the face
of a hostile Congress.
Obama
himself made major strategic blunder when he remained in the White House during
the farcical ‘shut-down’ last October instead of attending the APEC conference in
Bali, leaving China to do all the running, and resulting in foreign policies being
adjusted to reflect signals from Washington that America has lost its appetite
fr global leadership.
The
Asian tigers are beginning to look a tad mangy.
There
is a danger of China’s banking system
imploding in a re-run of 2008. The days of double digit growth are almost
certainly over as it becomes a mature economy. There is a menacing housing
bubble. China has to make the change from supply-side economics to demand side,
creating greater domestic consumption.
Society has changed with the creation of a burgeoning middle-class who want
up-scale housing, the Mercedes and foreign travel. The authority of the
Communist Party will be undermined if it is unable to respond adequately to
rising expectations.
Indonesia
is having serious problems from politics intruding on economics. The recent ban
on mineral exports has thrown whole communities out of work. Cambodia is rent with
troubles in the textile industry and widespread corruption in government.
Social unrest beckons in both countries.
The troubles in Bangkok are now having
noticeable economic effects. The Baht has fallen quite sharply against hard currencies;
tourism is down at the height of the season; FDI is drying up; investors are
dumping Thai bonds. This is triple whammy again. Politics is clashing with the
economy and with changes in society. The democratic nexus is coming apart
because the old elites refuse to recognise that democracy can only work if the
losers accept the result. The masses no longer accept that they are too
ill-educated and ignorant to be entrusted with the vote. Already there is talk
of the Lanna north, solidly ‘red’ (for Thaksin), seceding from the yellow south,
representing the old elites.
The
BRICS are no longer the world’s poster boys. Brazil has double-digit inflation,
huge capital flight, social unrest and endemic corruption. India has a
dysfunctional system of governance, breath-taking corruption, and a rapidly
slowing economy. South Africa has yet another mining strike, perhaps the biggest
ever, which will result in loss of investor confidence.
And
that old elephant is back in the corner again, this time as a nascent energy
revolution.
The
US is within reach of energy self-sufficiency. The geopolitical shock will be immense. Iraq
and Iran are planning to triple oil production with potentially major
political, economic and social impacts. The OPEC cartel will be seriously
undermined if solidarity over production volumes is breached. The security of
the house of Saud will be seriously, perhaps fatally, undermined if it is unable to buy security and social tranquillity
from its oil revenues. The economic effect in the west could be dramatic, with
lower prices at the pump and increasing access to new energy sources.
Amidst
the many uncertainties, one thing is clear. Radical changes are taking place in
the world order. Fasten seat belts; we are in for a bumpy ride.